Stop-Limit Order

Stop-limit order

A stop order that designates a price limit. Unlike the stop order, which becomes a market order once the stop is reached, the stop-limit order becomes a limit order.

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stop-limit order

A specialized order in which a limit order and a stop order are combined. Once the specified stop price has been reached or exceeded, the stop-limit order becomes a limit order. A stop-limit order differs from a stop order, which becomes a market order when the stop price has been reached or exceeded. A stop-limit order to buy must have a stop-limit price above the market price; conversely, a stop-limit order to sell must have a stop-limit price below the security's market price. In response to a stop-limit order specifying "sell 100 GY 15 stop limit," once the stock sells at or below $15, the order becomes a limit order to sell 100 shares at a price of $15. A variation of the stop-limit order specifies a limit price lower than the stop price.

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Stop-limit order. A stop-limit is a combination order that instructs your broker to buy or sell a stock once its price hits a certain target, known as the stop price, but not to pay more for the stock, or sell it for less, than a specific amount, known as the limit price.

For example, if you give an order to buy at "40 stop 43 limit," you might end up spending anywhere from $40 to $43 a share to buy a stock, but not more than $43.

A stop-limit order can protect you from a rapid run-up in price -- such as those that may occur with an initial public offering (IPO) -- but you also run the risk that your order won't be executed because the stock's price leapfrogs your limit.

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Stop-Limit Order

What Does Stop-Limit Order Mean?

A type of trade order that combines the features of a stop order with those of a limit order. A stop-limit order stipulates that a buy or sell order can be executed only at the limit price or better once the stop price has been reached.

Investopedia explains Stop-Limit Order

A benefit of a stop-limit order is that the trader controls when the order can be filled. The downside, as with all limit orders, is that there is no guarantee that the stock price will reach the limit price. If this happens, the order will not execute. A stop order is an order that becomes executable only when a set price has been reached; after that it becomes a market order. A limit order, in contrast, is executed only at a certain price or better. By combining the two orders, the investor has more control over the final trade price. A stop order is filled at the market price after the stop price is reached; therefore, it is possible to get a price very different from what the investor hoped, especially in fast-moving markets. For example, assume that ABC Inc. is trading at $40 and an investor wants to buy the stock once it begins to show some serious upward momentum. The investor places a stop-limit order to buy at a stop price of $45 with a limit price at $46. If the price of ABC Inc. moves above the $45 stop price, the order becomes a limit order to buy at $46 or better (less). As long as the order can be filled at $46 (the limit price) or less, the trade will be filled. If the stock jumps above $46, the order will not be filled.

Related Terms:
• Bear Market
• Bid
• Limit Order
• Stop Order
• Stop-Loss Order